Australian June quarter GDP is out, and it’s big a miss.
The economy grew 0.2% in the three months to June, missing expectations for an increase of 0.5%. It was the lowest quarterly increase since the March quarter of 2011.
In annualised terms the economy grew by a benign 2.0%, the slowest pace since the September quarter 2013.
In nominal terms, GDP growth was just 1.8% in the 2014-15 financial year, the weakest reading since 1961-62.
According to the ABS quarterly growth was driven by final consumption expenditure (+0.7ppts) and public gross fixed capital formation (+0.2ppts). Offsetting those positive contributions net exports (-0.6ppts), led by decline in exports (-0.7ppts), along with inventories (-0.2ppts) detracted from growth.
Breaking down the final consumption expenditure figure further, government spending contributed 0.4ppts to quarterly growth, outpacing a 0.3ppts contribution from households.
While exports and inventories are temporary factors that dragged on growth – just as they temporarily added to growth in Q1 – without the surge in government expenditure real GDP would have been negative.
Expect plenty of debate to follow on the true strength of the economy in the coming days.
The full breakdown of the GDP report in expenditure chain volume terms is found below.
After initially tumbling to as low as .6983 following the weak report, the Aussie dollar has recovered in recent trade with the AUD/USD currently buying .7016.
The ASX 200, already under significant selling pressure prior to the release of the GDP report, is largely unchanged.
Three-year Australian government bond futures are also fractionally lower (yields higher), trading at 97.88.